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TODAY'S OTHER NEWS

Which city is driving HMO decline? The answer may (not) surprise you…

Market analysis from Octane Capital has revealed that the number of houses in multiple occupation (HMOs) in England has dropped in the past year.

According to the property lending experts, the decline is likely caused by strict new regulations introduced by the government.

What changes have we seen in HMOs?

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In 2018, the UK government introduced new regulations which insist that a HMO licence is required for all properties that are occupied by five or more people who are not members of one family.

Previously, a licence was only required for properties of three storeys or more in which five or more people live and are not members of one family.

What's more, in order to obtain a licence, all rooms in an HMO must exceed a minimum size and can only sleep a certain number of people over 10 years old.

Since 2018, the rules change – which is said to ensure a better, safer standard of living for tenants – have been gradually rolled out across districts and boroughs.

As a result, the number of HMOs on the market has decreased with many landlords choosing to offload their buy-to-let stock instead of negotiating yet more hurdles due to legislative changes.

Where is the decline most prevalent?

Octane’s data shows that, on an annual basis, the number of HMOs in England fell by 3%, from 511,278 in 2019/2020 to 497,884 in 2020/21.

This overall national decline has been driven by the London market where the level of total HMOs has declined by 13% – the biggest reduction of all regions.

In the capital, 11 different boroughs have reported a drop, with the biggest coming in Ealing where HMOs have declined by 59%, followed closely by a 58% decline in Lambeth.

Redbridge has seen its numbers halved, and Barnet’s decline sits at -37%. The number of HMOs has also dropped considerably in Greenwich (-34%), Enfield (-30%), Wandsworth (-18%), Croydon (-13%), Hillingdon (-10%), Merton (-2%), and Tower Hamlets (-1%). 

It’s not all doom and gloom

Jonathan Samuels, Octane Capital’s chief executive officer, comments: “It’s only right that all efforts should be made to ensure the safety and wellbeing of the nation’s tenants and that everyone is afforded the right to a basic standard of living.”

“The changes to HMO licensing have certainly looked to ensure this, but as a result, we have seen a decline in the level of operational HMOs across the rental market, particularly within London.”

According to Samuels, this essentially means that those reliant on the rental sector now have even less choice when it comes to finding suitable, safe accommodation. But that’s not to say it can’t be found.

“We’ve continued to fund a high number of quality HMO deals throughout the pandemic and this sustained level of interest from professional investors is yet to show any signs of decline,” he adds.

“This includes a large number of refurbishment transactions whereby investors are looking to drastically improve the quality of existing HMOs, so while volume has certainly fallen, we don’t believe this will be a long term trend and should benefit the nation’s tenants in the long run.”

Table shows estimated number of HMOs in England for years 19/20 and 20/21 alongside annual % change
    Region Est number of HMOs 2019-20 Est number of HMOs 2020-21 Change 2019-20 vs 2020-21
    East Midlands 24,417 29,440 21%
    West Midlands 35,508 37,646 6%
    North West 47,489 50,084 5%
    South East 70,757 74,053 5%
    North East 20,395 20,581 1%
    South West 49,156 49,584 1%
    East of England 37,128 37,298 0.5%
   

Yorkshire and The Humber

53,618 49,016 -9%
    London 172,810 150,182 -13%
    England 511,278 497,884 -3%
           
    Table shows estimated number of HMOs in London for years 19/20 and 20/21 alongside annual % change
    Location Est HMOs 2019-20 Est HMOs 2020-21 Change 2019-20 vs 2020-21
    Barking & Dagenham 192 800 317%
    Kensington & Chelsea 4,000 8,244 106%
    Bexley 1,200 1,930 61%
    Hammersmith & Fulham 3,000 3,700 23%
    Newham 9,500 10,450 10%
    Havering 267 286 7%
    Bromley 2,074 2,215 7%
    Richmond upon Thames 97 102 5%
    Brent 16,984 16,984 0%
    Camden 8,000 8,000 0%
    City of London 100 100 0%
    Hackney 4,717 4,717 0%
    Haringey 6,000 6,000 0%
    Harrow 1,200 1,200 0%
    Hounslow 1,850 1,850 0%
    Islington 400 400 0%
    Kingston upon Thames 4,800 4,800 0%
    Lewisham 6,000 6,000 0%
    Southwark 5,020 5,020 0%
    Sutton 1,200 1,200 0%
    Waltham Forest 5,951 5,951 0%
    Westminster 9,539 9,500 0%
    Tower Hamlets 10,000 9,900 -1%
    Merton 2,040 2,000 -2%
    Hillingdon 5,000 4,500 -10%
    Croydon 3,000 2,600 -13%
    Wandsworth 820 670 -18%
    Enfield 10,000 7,000 -30%
    Greenwich 7,500 4,916 -34%
    Barnet 5,930 3,760 -37%
    Redbridge 4,000 2,000 -50%
    Lambeth 12,000 5,027 -58%
    Ealing 20,429 8,360 -59%
    London 172,810 150,182 -13%
  • icon

    This another publicity blurb from someone who can see their business being trashed. A type of whistling in the dark.

  • Philip Drake

    IR35 has probably had a significant impact on the HMO sector. The Independent contractor sector has been decimated since September 2019, so temporary weekday accommodation is no longer required. Couple this with work going offshore to bypass big companies being impacted by the IR35 Chapter 10 changes introduced by UK government in April 2021 (delayed by 1 year due to Covid).

    So overall, just because of the above there are less contractors working away from home and so less using HMOs.

    Add to this the Covid Big Resignation effect and there are even less people needing HMOs as they want to work closer to home.

    icon

    Spot on Philip Drake!
    IR35 implementation in private sector reduced HMO’s, Weekdays rooms demand, and CoVID19 made it worse.

    HMO, generally PRS Landlord’s are leaving the property sector due to an increase in costs, bureaucracy, and difficulties in evicting unscrupulous tenants with s.21 abolition.

    London’s Mayor & associates are muscling in to make people remain a renter for life & pay them the money instead of small PRS landlords.
    They are building ‘build to rent’ only homes - communism’s first step via back door entry by using tax payers funds in the guise of reducing homelessness by the Mayor’s policies-fooling the general public as always.

     
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